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Airline Deregulation: A Financial Markets Perspective on Who Mattered When Hayes, Jeffery W. Uploaded 08-17-1998 Keywords deregulation Abstract Deregulation has been one of the most important developments in the American administrative state during the post-war era. According to the existing literature, a host of factors played a role in the airline reform process specifically. Almost four decades after the deregulation movement began, the task is to re-examine the important developments and parse the more robust explanations. To what extent did different political, bureaucratic, judicial, and industry actors contribute to airline deregulation during the 1970s? A thorough analysis of this phenomenon entails tests of numerous related theories, including the influence of intellectual ideas, the contagion effects of other deregulation initiatives, and the intriguing but untested ``deregulatory snowball'' theory which posits a specific structural form for the reform process over time. Empirical obstacles, however, have prevented the resolution of many of the provocative research issues surrounding deregulation. Financial market data are an ideal resource to fill this lacuna since reform had significant and negative economic ramifications for the regulated air carriers. A financial markets perspective on regulatory reform yields illuminating results. To begin with, a broad range of institutions contributed to the likelihood of airline deregulation. Congressional influence was especially important. On the other hand, the impact of the CAB was generally more limited than many analysts have believed. Interestingly, the influence of Congress and the CAB were inversely related over time, suggesting the agency's limited role solely as an initial policy entrepreneur while Congress' importance grew as statutory deregulation became the strategic choice of reformers. Additionally, we find evidence that both the politics of ideas and legislative contagion were relevant factors in the reform debate. On the other hand, the deregulatory snowball hypothesis is clearly rejected for the case of the airlines. These findings add a new layer of understanding to the literature on political control of regulatory policy.